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Allozyne Conducts Round of Employee ‘Furloughs’

Seattle-based Allozyne, one of the promising biotech drug developers to graduate from the venture-backed Accelerator, recently conducted a small round of employee furloughs.

Allozyne made the latest round of reductions to its payroll a little more than a year after another round of job cuts that I reported here in January 2012. CEO Meenu Chhabra Karson said by e-mail, “We did not lay off anyone recently,” but declined to answer further questions. Three other sources close to the situation said staff reductions were made recently at Allozyne and described internally not as “layoffs” but as “furloughs,” which suggests the people affected may be called back. On the company Web page, Chhabra Karson and Ken Grabstein, the chief scientific officer, are the only members still listed as part of its management team.

Allozyne got off to an auspicious start in 2005, with backing from Accelerator and technology licensed from Caltech to engineer desirable properties into targeted protein-based drugs. The company had more than 20 employees at one point, and spent about $50 million of investment capital in its first five years in business, according to a filing with the Securities and Exchange Commission in October 2011. But Allozyne ran into difficulty when a reverse merger deal fell apart in December of that year with Poniard Pharmaceuticals, which would have turned Allozyne into a public company. Regulatory filings from 2011 showed Allozyne got down to as little as $1.1 million of cash left in the bank while it was working on the Poniard merger. The company raised another $4 million of debt and warrant offerings between February and June of last year, according to more recent regulatory filings.

The company spent much of its early days working on a genetically engineered form of interferon beta, a popular drug for multiple sclerosis. The Allozyne version was supposed to last longer in the bloodstream and enable patients to get by with fewer injections. That drug, AZ01, showed some encouraging properties in a small clinical trial and is still listed as part of the Allozyne pipeline on the company website, but its prospects appear limited. The world’s largest maker of multiple sclerosis drugs, Biogen Idec (NASDAQ: BIIB) reported in January that its long-lasting version of interferon beta succeeded in a clinical trial of 1,500 patients. The competing drug showed it could control multiple sclerosis flare-ups in both an every-two-week injection and a once-monthly injection.

That result essentially means Biogen Idec is putting itself in position to introduce its long-lasting version of interferon beta years before Allozyne’s could get to the market. The sales potential for such a drug is clearly big, as Biogen generated $2.9 billion in sales last year from its existing interferon-beta drug, Avonex, which requires more injections.

Other than its multiple sclerosis drug candidate, Allozyne has also talked publicly about other drug development programs, including one that’s a bispecific antibody designed to hit two molecular targets instead of one, and an antibody-drug conjugate program that links a targeted antibody to a toxin that makes it more potent. Allozyne presented data at a scientific meeting in September that said its bispecific antibody candidate that binds with inflammatory molecules IL-6 and IL-17 was able to decrease symptoms of psoriasis in mice. In December, Allozyne said its antibody-drug conjugate aimed at breast cancer cells that overexpress the HER2 target was able to significantly shrink tumors in an animal study.

we’re conducting a paid study with Allozyne and haven’t seen or heard any issues either – management team is extremely professional and scientists are hitting our goals. I’d be surprised if this were true.

Have you been able to verify the story? In other words, have you seen the labs and their offices and found them empty? Otherwise how can we readers be sure that you are not just passing on rumors some random person gave you?

I call BS on the previous comments? Luke has high integrity and moral values and would never report gossip ever! And most of you reading this know who I am and that I have highest moral and integrity standards that you can have.

Agreed. Not sure this was newsworthy, but even if there is any truth (since it was unconfirmed) I would give Chhabra Karson credit for keeping the senior team small and capital smartly invested on key R&D talent, which I’m sure wins respect in the lab. It would be great to see other biotechs strive for the same cash burn discipline.

Be as it may, the bottomline is they licensed a valuable technology from Caltech, burned $60m and have no discernible value created to show for. Why?

It’s the ethos of BS and sliminess that permeates most OVP operations, which is the problem. Remember when Weismann was pumping-up here at Xconomy, prior to the reverse merger fiasco? Read some of the first Allozyne articles at Xconomy. They were such puff pieces, I seriously thought that Luke had a crush on the CEO.

But then, after being fed BS consistently, apparently Luke wisened-up, and is no longer acting like their outsourced PR; which, judging by this comment-storm, has made them quite upset..

Having worked directly with the company very recently, I’ve seen absolutely no evidence or impact of the alleged personnel management “reported” here – Allozyne has a solid team and is extremely well led, so hopefully this rather loose and speculative story won’t needlessly create noise or disrupt the company’s ability to operate and deliver on its technology (which is truly exciting!). I have to say, I seriously doubt the accuracy of this story and would think even Xconomy has a higher journalistic bar for what even qualifies as newsworthy…shame.

As another source very close to the situation, it’s clear that Luke’s been misinformed by his other 3 sources…what’s the point of this story? Slow “news” day? In other news, I’d like to report I witnessed a water-skiing squirrel on YouTube…

Thine dost protest too much! Let us hear it from the leadership. Have any employees had their income adjusted as a result of cost cutting efforts at Allozyne? The vitriol from the comments seems rather Allozyne-centric. Journalism is not your primary concern here folks.

Who cares if that’s you or not? The point is to attribute any critical comment to a supposedly disgruntled former exec, and all problems, like magic, would go away. It’s dumb, I know, but that’s how these folks operate….